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FRC opens consultation into accounting for corporate gift aid

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Publish date: 26 September 2017

Archived on: 26 September 2018

The FRC has launched a consultation into FRED 68, which proposes an amendment to FRS 102 regarding the accounting of payments to charities by their trading subsidiaries.

The FRC is aware that there is divergence in the accountancy sector into this treatment and therefore is proposing this amendment to address this.

The proposed amendment is to add the following under section 29 of FRS 102.

29.14A As an exception, when:
a) an entity is wholly owned by a charitable parent;
b) it is probable that a gift aid payment will be made to the charitable parent within nine months of the reporting date; and
c) that payment will qualify to be set against profits for tax purposes, the income tax effects of that gift aid payment shall be recognised at the reporting date. The income tax effects shall be measured consistently with the tax treatment planned to be used in the entity’s income tax filings. A deferred tax liability shall not be recognised in relation to such a gift aid payment.

Paragraph 29.22A shall be amended as follows.

29.22A As an exception to paragraph 29.22, an entity shall present the tax expense (income) effects of distributions to owners in profit or loss.

The consultation closes on 20 October 2017. Full details of the consultation and proposed amendment can be found here.